Bank charges could be set for another court battle after a ruling by a Glasgow Judge cleared the way for a proof hearing into determining whether bank charges are fair.

The Supreme Court verdict last November ruled the Office of Fair Trading could not assess bank charges under section 6 of the 1999 Unfair Terms in Consumer Contracts regulations, but suggested the banks might still have a case to answer under section 5 of the same act.

On Friday at Glasgow Sheriff Court, Sheriff Baird ruled against the Bank of Scotland in its attempts to prevent a customer amending her bank charges claim and fixed a full evidential hearing for the case.

Aided by solicitors from Govan Law Centre, the claimant succeeded in persuading the judge to allow a new challenge against the bank under regulation 5 of the UTCCR. What’s more, a request was also made asking the court to prohibit the bank from imposing future charges against the claimant under S140 of the Consumer Credit Act.

The proof hearing may result in the bank being forced to show that its charges were not excessive under the consumer credit act in a development which places the onus on the banks to prove charges are fair.

“Over the last few weeks, UK banks have been telling one million customers that there were now no grounds to reclaim bank charges, standing November’s Supreme Court’s decision. Of course, the Supreme Court itself had explained that charges could still be challenged under different legal grounds, and that is what Sheriff Baird has permitted our client to do today at Glasgow Sheriff Court,” said Mike Dailly of the Govan Law Centre, representing the successful pursuer.

“Bank of Scotland now faces a fresh challenge that charges were excessive and unfair under the Consumer Credit Act. That is a potentially devastating case for them to answer, because under this new law the onus of proof is on the bank to show that charges were fair. Given that our banks have admitted they subsidise ‘free-if-in-credit banking’ by squeezing more money out their poorest customers through bank charges, they will now have to defend the indefensible. And, they will have the added problem that we are asking the court to prohibit them from imposing future charges under the CCA”.

“In a nutshell, our new arguments are hugely more powerful than the ones deployed by the OFT in their unsuccessful test case. Evidentially, the new arguments require the bank to prove their charges were fair – which is tactically significant for consumers. The new arguments not only enable consumers to seek a refund of past charges, but entitle them to ask the court to prohibit future bank charges. That is hugely significant, and in many respects, we believe the new bank charges campaign is going to be a tougher propsect for the banks than the pre-July 2007 campaign. And of course that previous campaign saw refunds in excess of £1bn for consumers across the UK – so we are incredibly optimistic”.

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Wednesday week (25th November) will be D-Day for the banks in the long-running bank charges saga after it was announced earlier today that the Supreme Court will deliver their ruling on the legal battle according to MoneySavingExpert.

Both the High Court and the Court of Appeal have ruled that charges can be assessed for fairness by the OFT, and if the Supreme Court upholds that view then it could reopen the floodgates for consumer claims for compensation against their banks.

The hearing is scheduled to be handed down at 9.45am where the law lords will deliver their verdict into whether or not charges of around £39 each for exceeding overdraft limits or returning a direct debit are fair. The Supreme Court has already hinted that it thinks they are unjust and are widely expected to throw out the banks’ appeal.

Over one million claims are currently stuck in limbo and clogging up the legal system, thanks to a FSA waiver and prior to the litigation banks had already reimbursed consumers with more than £1 billion before claiming was suspended.

However, even if the Supreme Court does find in favour of the OFT there is little to prevent the banks challenging their findings and so continuing to drag the whole affair on for much longer. According to MSE, it would be hoped that political intervention after the verdict would prevent any further appeals, especially given the fact that some of the banks in question, including Lloyds TSB and HBoS are taxpayer-owned.

“I’ve had letters from Messrs Brown, Cameron and Clegg all effectively committing to that and MoneySavingExpert.com, with its 8 million users a month, will try and ensure they stick to their promise.” Martin Lewis, consumer champion and founder of MoneySavingExpert.com commented.

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